Problem 3: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor:...
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Problem 3: The following facts pertain to a non-cancelable lease agreement between Lessee and Lessor: Date of the lease 12/31/YO Annual lease payment Payment 1 due immediately) $20,472 Bargain Purchase Option (lessee expects to exercise) $4,000 Lease Term 5 years Economic Life of Leased Asset 10 years Lessor's Cost of the asset $65,000 Fair Value of the asset $91.000 Lessor's Implicit Rate & Lessee's Incremental Borrowing Rate The collectability of the lease payments by Lessor is probable. A. For the lessee, is the lease a finance lease or an operating lease? Explain why or why not. B. Prepare the lessee's journal entries through 12-31-Yr2. C. What accounts and balances will be shown on the classified balance sheet and multistep income statement at 12-31-Yr1? Name of Account Balance Financial Statement Account Classification
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